When it comes to buying or selling a residential property in Queensland, signing a contract can be a significant moment for both parties involved. However, Queensland's Real Estate Institute of Queensland (REIQ) contracts include something known as the statutory Cooling Off Period.
This period provides potential buyers with a window of opportunity to reconsider their decision and terminate the contract unconditionally without incurring any substantial penalties.
1. The Duration of the Cooling Off Period
The cooling off period begins the day the Buyer (or their solicitor) receives a copy of the fully executed contract
The cooling off period ordinarily lasts for five business days (unless shortened or waived, which we'll cover below), and ends at 5pm on the final day of the cooling off period.
For example, if a contract is signed by the Seller on a weekend and then provided to the Buyer on a Monday, the cooling off period will end on the Friday. It is 5 business days including the date of receipt, not 5 business days from the date of receipt.
2. Termination and Penalties
To terminate the contract during the cooling off period, the Buyer must provide written notice to the Seller or their agent within the stipulated time.
While the cooling off period allows the Buyer to terminate the contract without providing any reason, it's important to keep in mind that the Seller may impose a penalty of up to 0.25% of the purchase price from the deposit.
For example, if the purchase price is $1,000,000, then a termination penalty would be $2,500. If the initial deposit is less, say $1,000, then only the $1,000 would be recoverable if the Buyer terminates under cooling off.
Remember that the cooling off period is not a negotiating tool once the contract has been signed. It allows the Buyer to reconsider their decision with a minimal financial penalty.
3. Exemptions from the Cooling Off Period
Whilst the cooling off period is a standard feature in residential REIQ contracts, exemptions may apply in particular circumstances. This includes:
A property sold at auction;
A follow-up sale after an unsuccessful auction (before 5pm on the second business day), in which the buyer was a registered bidder;
Where the Buyer is a publicly listed corporation;
Where the Buyer is the State or statutory body;
Where the Buyer is purchasing at least 3 lots at the same time (regardless of whether they are in the same contract);
Commercial property contracts; and
Where the buyer has waived their right to a cooling off period.
If the Buyer wishes to waive or shorten their right to a cooling off period, they must do so in writing. It is common to see this as an annexure to a contract of sale, and is often used where the Buyer wishes to make their offer more favourable and provide certainty to the Seller that they are committed to the purchase.
If the Buyer was unsure about the property, we would recommend negotiating a longer timeframe for the deposit due date, so that it is due after the cooling-off period, restricting the ability for the Seller to impose a termination penalty.
Understanding the cooling off period and its implications can empower a Buyer to make confident and well-informed decisions when venturing into the property market.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
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